- Chinese companies are rushing to build smelters in Southeast Sulawesi, one of the world’s most abundant sources of nickel.
- Mining in the Indonesian province has wreaked havoc on the environment and people’s health, but the problems receded somewhat when Jakarta banned raw ore exports for companies without smelters in 2014.
- Now, dozens of smelters are in the pipeline, and it is unclear whether officials will be able to keep the reawakened industry in check.
Helicopter over a forest supplanted by a mature oil palm plantation and it will look verdant from the sky. The ocean surface over a bombed-out reef still glimmers aquamarine. But mine a peninsula, and the land turns from lush green to a muddy yellow that bleeds into the surrounding waters in long curlicues.
Until the 1990s, the fishing hamlets of Hakatutobu and Tambea, 30 kilometers south of the town of Kolaka in Southeast Sulawesi, had some of the richest sea cucumber beds in the 38,000 square kilometers of the province.
“Cast a net and you could watch it fall, the water was clear and the sands were white,” recalled Haji Burman, one of the founders of Hakatutobu.
Then in 2003, the cape in front of the village was leased to Antam, a state-owned mining enterprise. Four years later, mud from the strip-mined area began leaking into the sea, blanketing the sheltered cove in front of town. Today, you can spot Hakatutobu and the quarried cape from a passenger jet on a clear day. The ocean a kilometer out runs in shades of red and ochre.
“More companies came and our waters turned red and almost all of our seagrass and fish disappeared,” Haji Burman recalled.
Indonesia is the world’s most abundant source of nickel, and the mother lode of the archipelago’s deposits lies in Southeast Sulawesi. As British-Australian mining giant Rio Tinto portrayed it in a mining conference presentation in 2008, this region is “the world’s largest undeveloped nickel opportunity.”
For seven years, Southeast Sulawesi’s mining industry boomed in step with China’s steel production. Ore exports doubled annually. Dirt from central and western parts of the province got shipped to China to be smelted, alloyed into steel and molded into scaffolding for Shanghai high-rises or rebar bound for hardware stores worldwide. It seemed China couldn’t get the Indonesian ore out of the ground fast enough.
For one thing it was cheap. Southeast Sulawesi’s laterite nickel ore was being shipped abroad as ferronickel or nickel pig iron, an admixture of nickel and iron that cost a lot less than increasingly expensive pure nickel ore from elsewhere.
Then, too, in 2009 the Indonesian government started threatening to ban raw ore exports in an attempt to bring value-added smelting and refining industry into the country. This only inspired Chinese mine operators to step up raw ore extraction while it could still be exported on the cheap.
From 2007 to early 2014, Southeast Sulawesi’s main ore port, Pelabuhan Mata, was busy. Sixty thousand tons of nickel ore shipped out of there every two to three months, according to Kisran Makati, the regional representative for the Indonesian Forum for the Environment (Walhi), an NGO.
“It all went straight to China,” recalled Bahar, the old harbor watchman who, like many Indonesians, goes by one name. Soldiers, policemen and private security forces guarded the tawny hillocks of gravel ore.
Then, in January 2014, it all ground to a halt. Jakarta finally made good on its threats: no raw ore extraction for companies without substantial smelting capacity onshore in Indonesia.
Pelabuhan Mata’s police and soldiers got reassigned away from the port. Bahar went back to his old job, driving a motorcycle taxi. Local residents set up a volleyball court in a shady patch of pier yard, under an abandoned ore mound. Weeds have reclaimed the wharves in thickets deep enough for monitor lizards to stalk neighborhood chickens.
The lull might not last much longer, though. Indonesia’s ore-smelting ambitions may not remain permanently out of reach. Even though in the two years since the ban, only one foreign-backed smelter has set up, the national mining ministry lists 34 companies applying to build smelters in Southeast Sulawesi. Only eight of them have completed their required environmental impact assessments to date.
But market analysts see the slowdown as no more than a blip. When the 2014 ban was imposed, Chinese steel producers had 7-9 months worth of nickel ore stockpiled. Despite China’s economic slowdown, that stash has by now dwindled to almost nothing. So there is a strong financial incentive to resume mining, even if it means paying the implicit “tax” of building smelters.
Whatever that might bode for Indonesia’s macroeconomic and fiscal fortunes, it’s very bad news for the environment. Along with renewed strip-mining and offshore siltation – a type of water pollution – there will now be the added bane of airborne sulfur dioxide and ash.
In the run-up to December’s UN climate summit in Paris, China’s carefully cultivated “greener” image took a hit when it had to revise its air quality indices to account for these smelter-generated pollutants. Now it can export some of these embarrassing emissions to Indonesia, which has little experience dealing with such toxins.
Southeast Sulawesi is about to learn, though, in startlingly short order. In the town of Pondidaha, the region’s newest smelter is already halfway complete. The Chinese investor, a privately owned company called Virtue Dragon, was in such a hurry to get it running that it created a dedicated harbor 13 kilometers away just to bring in material. Standing amid cranes and monster trucks, Tony Wang, the 28-year-old site manager, boasted to Mongabay that “we built this road and port in just three months. We expect the whole facility will be ready within the year.”
Such breakneck timetables entail a certain amount of collateral damage. Already the area is choking with road dust. Locals complain of lung infections, reported Asmat, the headman of the neighboring village of Purui. “We’re bathing in dust. Large trucks are on this road at all times of day and night.”
Nor, he added, is Wang’s company even generating a lot of jobs for locals. “We want to work there but they don’t hire us,” said one village woman, Tina. “They say we’re unskilled.” Instead, Tina, her husband and many of their neighbors sell fine grain sand to builders that send trucks to Purui. The sand acts as a base for cement. Most used to be mandarin-orange farmers. But when the river near town started silting up five years ago because of mining upstream, they opted to be day laborers instead. “You can make 300,000 rupiah ($22) a day digging sand,” Tina said. “Cultivating oranges or vegetables takes months. You don’t make any money till you sell.”
Road dust and underemployment might be just the start of Pondidaha’s troubles, though. There could be much worse in store, judging from the experience of the region’s earliest established smelter, run since 1968 by Antam, the state-owned mining enterprise, in its company town of Pomalaa. Public health centers there and in nearby Kolaka report that lung infections regularly top the list of ailments they treat, outstripping any other health complaint by a factor of 3-5 times.
Locals need no statistics to understand the rain of poison from the mines and smelter. Residents of nearby Tambea say that once or twice a year, black ash coats the water. The town’s beachfront got extended 20 meters by slag from the hill slope above where Antam and private companies have been strip-mining.
Southeast Sulawesi’s Environment Service, based in Kendari, the far-off provincial capital, tries its best to monitor the situation. But with such limited resources, the agency is often forced to rely on the mining and smelting operators’ own self-generated data. In her Kendari office, Supiati, the province’s pollution control chief, assured Mongabay that her staff performs biannual “passive checks” of facilities. That means they examine company records for compliance with the firm’s initial environmental assessment commitments. Air quality statistics are pulled from analyses done by “accredited air quality checkers.”
Even that level of oversight has so far proved impossible, Supiati admitted, when it comes to keeping track of slag and runoff from the mines. That is because most of the smaller scale mining permits, including the one held by Wang’s company, were issued at the district, rather than the provincial, level. And local authorities handed out far more permits than they had the capacity to monitor.
In the Pomalaa vicinity, for instance, Supiati confirmed that the provincially licensed Antam actually built the prescribed check dams, which counteract erosion, in the strip-mined moonscape it left behind. But that hasn’t been enough to hold back runoff in the rainy season from the smaller-scale, locally licensed mines uphill from Antam. (Mining Service officers in Kolaka district were all out of town and unavailable to Mongabay for comment.)
Things may improve, Supiati ventured to hope, if the 2014 ban on raw mineral exports forces an industry consolidation that favors larger, provincially licensed operators and squeezes out locally licensed small-timers.
Any such changes, however, seem unlikely to save local Kolaka villagers like Tarwan. He started out as a successful seaweed farmer. When the waters muddied, he became a roadside auto mechanic servicing ore trucks for small, foreign-backed mines.
“Now they are no longer operating and neither am I,” Tarwan lamented.